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Scamp, which Ice Man did you have in mind, the Dutch motivation speaker, Win Hof, the one from Top Gun, Tom Kazansky, or the one from the X-Men films, Thermokinesis?
From the JP Morgan note: "The group is carrying £985 million of net debt, which has doubled year on year."
That is not good, especially against a background of swiftly rising interest rates. I think we need to examine the nuts and bolts here and ascertain how this company's debt has increased so much over the last year. I bet most shareholders do not know why the debt has doubled, and that is a problem.
It seems to me that each time I go to the post office to mail an item it costs more, so where's the money going?
Iam with you here..almost dipped in again this morning…but held off…no idea if that will turn out correct,we will see:-)
this is going to need very careful timing.
Soon...the 'Ice Man' cometh.
hounddog10 thanks for your very detailed response and it makes a lot of sense even to myself...the debt doesnt look great but hopefully when we get further down the line we may see some improvement and I guess the availability of debt is also driven by many other factors. Thanks again
ah right, that's why your so bitter
JB. Thanks. The debt is set out in a table on page 206 (Note 23) of the annual report. RMG have issued two Eurobonds - one for Euro500m (£416m) and another for Euro550m (£456m). They also have a facility for £925m. The first Eurobond matures in July 2024, the second in 2026. The facility, which as I noted before is undrawn, was extended to 2026 by RMG in October 2021.
The Eurobonds are uncovenanted, as is usual. The facility, again as is usual, has EBITDA (Earnings Before Interest Tax Depreciation and Amortisation) covenants (see page 207). One of EBITDA versus net debt and the other against interest. Without going into numbers you essentially need to have a decent amount of EBITDA to comply with these tests and the big variable factor in this is earnings which will now be losses. Also at the last balance sheet they had significant cash (£1,137m) but that probably is getting run down heavily due to losses and more particularly capex, particularly for the second SuperHub. So their net debt will be rising rapidly (previously they actually had net cash). That makes one of the tests much more difficult.
Looking more closely at the numbers I think I am wrong that they are currently in breach of the facility but think they will be some time next year. There are no particular repercussions at the moment anyway because the facility is undrawn but it looks to me (because of largely matching size of amount and dates) that the facility is there to fund the Eurobonds when they mature. Without the facility they will have to find from elsewhere Euro500m to repay the first Eurobond in July 2024. That is not too far away and will be a major issue in assessing RMG’s financial viability.
Two other reasons why I think they will have increasing difficulty on debt facilities:
(I) When, during the pandemic, they were (wrongly) expecting losses of the magnitude that might now come through in the next year or so they got the bank to relax the covenants. Whether the bank will do that again is uncertain particularly giving rising rates and potential rating downgrade.
(2) I don’t think S&P are assuming the facility will be available as they are suggesting that RMG could do sale & leasebacks on its properties to raise money. This is a bit of a last resort if it is to fund losses and won’t please K as balance sheet value is being eroded.
I meant £6 sadly , down about 10k
mhudson, it's no good holding at 6....you need to sell before 4:29......
oh hell yeah , wasted hours is just funny , 4 bay staff having a cushy evening between vans and then sometimes the work fails while they sit down
mhudson thanks for sharing your views and I know a lot of the practices you mention have been around for years. I guess the positive way of looking at that is there are huge savings still to be made.
Redceo yep analysts change their opinions on a very regular basis to suit. I wonder if we are seeing the shorters come back into play. I am sure it will suit DK/VESA to pick up even more at the lowest SP possible. I think it is correct to say that if he gets the go ahead and buys to go over the offer threshold his offer would need to be £3.30 plus. I wonder who is buying up the shares that are being sold?
100% agree , they to lose the USO , and tender out all aspects of Distribution
When MC are run as bad as the one i just left , then the business has had it , the wasted man hours just 10 miles up the road from newport , SHEDULED ATTENDANCE HOURS , EARLY FINISHES , GHOST OVERTIME GIVEN TO STAFF AND DISTRIBUTION AND UNEEDED NIGHT ALLOWANCE BEING LOBBED TO STAFF WHO COULD DO IT AS MORNINGS.
The surplus of staff is funny , stood round doing nowt most of the time.
This business we be at an all time low in terms of valuation and this is a small MC , imagine the bigger ones ?
casperdog hopefully you havent lost much and you have to make the best decision for you. GL
Hounddog10 thanks for your posts. I know nothing about the debt rules, requirements etc. Can you share what has made you come to the conclusion that the business has breached its debt agreements?
The share that just keeps giving.
Its always a good opportunity when its cheap imo
time2kill thanks for sharing and there is certainly plenty of negative news around. The business has spent £900m on automation over the last 3 years so a chunk of that will be included. It doesnt make good reading however it is cut but as some would suggest the figures are being lets say misrepresented to fit an agenda.
Looks like it's time to bale out of this stock. Don't see any future coming soon. Time to take the pill and unload before there's nothing left.
Just like Mark's & Spencer imbeciles in control, running them into the ground?
This great company has had it , gutted I held at 6
No the analysts at the banks cannot be trusted. They are invariably wrong - but nearly always on the upside. For those that do not have much knowledge here is a brief explainer. The City has a buy side (investors) and a sell side (those that are trying to flog services to companies - aka the corporate finance (deals) crowd). The analysts align with the the sell side. By regulation the buy and sell side are separated by Chinese walls, which more or less work. There is little money in traditional equity trading for banks - razor thin margins. So why then do the analysts analysing company results exist? Well, it is a tenuous existence but it is largely there to support flogging corporate finance services ie deals (which can be very profitable) to management. A top rated analyst’s bonuses really depends on this (albeit indirectly). So the analysts are nearly always consistently upbeat about a company’s prospects. It is only when it becomes blatantly apparent that things are going badly that they change their outlook.
As for the rating agencies which singularly failed to spot the impending failure of banks (along with the auditors) before the financial crisis they too are conflicted. The company pays them. Given that what do you think their outlook when rating a company might be? So for them to downrate is simply catching up with reality.
RMG (or the RM bit) is in real trouble. It looks to me that they are now in breach of their (undrawn) c£900m facility so that falls away. Their existing debt could be downgraded to junk status and they have to repay one of their Eurobonds in July 2024. A gathering storm.
Debt doubled in a year to £985m, where's all that been spent??? Meanwhile RM claim they can't afford just £100M or so extra to give their staff a decent pay rise!
Shares in Royal Mail crashed 8 per cent on Friday following a profit warning from FedEx, the global delivery firm. JP Morgan, the investment bank, has also warned that Royal Mail’s dividend may come under threat.
Royal Mail says it has 40 per cent of the UK parcel delivery market but S&P reckons it is losing share to DPD, Amazon and Evri, the delivery firm previously known as Hermes.
It believes the company will start taking mitigating action to offset falling cashflow. “Such action could include reducing discretionary capital expenditure, reducing or suspending dividends, as it did in 2020-21 at the onset of the pandemic, and undertaking sale and leaseback transactions,” S&P said.
Royal Mail declined to comment on S&P’s decision to put it on negative watch list
https://www.thetimes.co.uk/article/royal-mail-in-a-tight-spot-as-it-fights-to-avoid-debt-downgrade-87jsqz0wc
Monday September 19 2022, 12.01am, The Times
Royal Mail is struggling to deliver profits in the UK as the online shopping boom fades and its workforce threatens more strike action
Royal Mail is struggling to deliver profits in the UK as the online shopping boom fades and its workforce threatens more strike action
Royal Mail may have to cancel its dividend and sell off property if it is going to weather the storm of a falling parcels delivery market and worsening industrial relations this winter.
That is the warning from Standard & Poor’s, the credit rating agency, which has put the privatised postal group on negative watch with the possibility of a downgrade of its debt to a “speculative” for bond investors. Poorer ratings mean more expensive borrowing.
The warning came as S&P calculated that Royal Mail’s funds-from-operations-to-debt ratio — a key metric for calculating whether a company can service its borrowing from income alone — has fallen below 45 per cent, a red flag for the ratings agency.
Having posted record profits during the pandemic through the boom in online shopping and home deliveries, Royal Mail in the UK is losing £1 million a day. That market has gone from returning to normality to worsening as consumer confidence withers in the face of a cost of living crunch and an impending recession. Online shopping fell 9.5 per cent year on year, official figures for August show.
Royal Mail, which can trace its roots to 1516 when the first postal service was set up during the reign of Henry VIII, has two main businesses: its British-based letters and parcels operations that carry the Royal Mail brand; and its GLS international division.
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The group is being propped up by its successful and profitable European and US courier operations, which it has said it may demerge. The group is carrying £985 million of net debt, which has doubled year on year.
The company has warned that its financial position will worsen if it cannot reach an agreement with striking postal workers in a dispute over pay. The pay deal is also tied to changes in parcel sorting automation which the company argues need to happen to return the business to profitability.
S&P says if Royal Mail falls below that 45 per cent threshold it will look again at its BBB rating. “The negative outlook reflects that we could downgrade Royal Mail in the next 12 to 24 months,” the agency said. It is forecasting sharply falling operating income from a 6 per cent to 8 per cent fall in parcel volumes this financial year, with letters in chronic decline at up to 10 per cent a year.Royal Mail in a tight spot as it fights to avoid debt downgrade